______________________________________________________________________________
LOAN AGREEMENT
Among
FIRST COASTAL CORPORATION,
Borrower,
and
ANDROSCOGGIN SAVINGS BANK
BANGOR SAVINGS BANK
MACHIAS SAVINGS BANK
NORWAY SAVINGS BANK,
Lenders
and
MACHIAS SAVINGS BANK,
Agent
July 24, 1996
TABLE OF CONTENTS
ARTICLE I. ISSUANCE, PURCHASE, INTEREST RATE AND REPAYMENT OF
NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Issuance . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Purpose of Note Purchase . . . . . . . . . . . . . . . 3
Section 1.3. Term of Loan; Repayment of Principal . . . . . . . . . 3
Section 1.4. Prepayment . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.5. Interest . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.7. Method of Payment. . . . . . . . . . . . . . . . . . . 5
ARTICLE II. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1. Borrower Security Interests. . . . . . . . . . . . . . 6
Section 2.2. Perfection and Administration. . . . . . . . . . . . . 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 7
Section 3.1. Organization . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2. Authorization. . . . . . . . . . . . . . . . . . . . . 9
Section 3.3. Validity . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Governmental Approvals . . . . . . . . . . . . . . . . 10
Section 3.5. Litigation . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6. Records and Business Location. . . . . . . . . . . . . 11
Section 3.7. Security Interests . . . . . . . . . . . . . . . . . . 11
Section 3.8. Encumbrances . . . . . . . . . . . . . . . . . . . . . 12
Section 3.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.10. Regulations U and G . . . . . . . . . . . . . . . . . 12
Section 3.11. Financial Statements . . . . . . . . . . . . . . . . . 12
Section 3.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.13. Compliance with Applicable Laws, Agreements, etc. . . 14
Section 3.14. Absence of Adverse Changes . . . . . . . . . . . . . . 15
Section 3.15. Accuracy of Statements . . . . . . . . . . . . . . . . 16
Section 3.16. Environmental Matters . . . . . . . . . . . . . . . . 16
Section 3.17. Allowances for Losses and Real Estate Owned . . . . . 19
ARTICLE IV. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 20
Section 4.1. Conditions Precedent to Closing the Purchase . . . . . 20
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ARTICLE V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 23
Section 5.1. Existence and Good Standing . . . . . . . . . . . . . 23
Section 5.2. Taxes and Charges . . . . . . . . . . . . . . . . . . 24
Section 5.3. Insurance . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.4. Financial Statements . . . . . . . . . . . . . . . . . 25
Section 5.5 Reports . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.6. Capital Maintenance Requirements . . . . . . . . . . . 27
ARTICLE VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 28
Section 6.1. Mergers and Related Transactions . . . . . . . . . . . 28
Section 6.2. Stock and Dividends. . . . . . . . . . . . . . . . . . 29
Section 6.3. Encumbrances and Indebtedness . . . . . . . . . . . . 29
Section 6.4. Sales and Dispositions . . . . . . . . . . . . . . . . 30
Section 6.5. Ownership of Subsidiaries . . . . . . . . . . . . . . 30
Section 6.6. Capital Expenditures . . . . . . . . . . . . . . . . . 30
Section 6.7. Financial Requirements . . . . . . . . . . . . . . . . 30
ARTICLE VII. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . 30
Section 7.2. Acceleration . . . . . . . . . . . . . . . . . . . . . 33
Section 7.3. Right of Setoff . . . . . . . . . . . . . . . . . . . 34
Section 7.4. Rights to Pledged Stock . . . . . . . . . . . . . . . 35
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.1. Rights and Waivers . . . . . . . . . . . . . . . . . . 35
Section 8.2. Binding Effect; Assignment . . . . . . . . . . . . . . 36
Section 8.3. Severability . . . . . . . . . . . . . . . . . . . . . 36
Section 8.4. Interpretation . . . . . . . . . . . . . . . . . . . . 36
Section 8.5. Governing Law . . . . . . . . . . . . . . . . . . . . 37
Section 8.6. Payment of Expenses and Taxes . . . . . . . . . . . . 37
Section 8.7. Survival of Representations and Warranties . . . . . . 38
Section 8.8. Notices . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.9. Execution . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.10 Amendments . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.11 No Fiduciary Relationship . . . . . . . . . . . . . . 39
Section 8.12 Definitions . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 9.1. Appointment, Powers and Immunities . . . . . . . . . . 41
Section 9.2. Reliance by Agent . . . . . . . . . . . . . . . . . . 42
Section 9.3. Events of Default . . . . . . . . . . . . . . . . . . 42
Section 9.4. Rights as a Secured Party . . . . . . . . . . . . . . 43
Section 9.5. Indemnification . . . . . . . . . . . . . . . . . . . 43
Section 9.6. Non-Reliance on Agent and other Savings Banks . . . . 44
Section 9.7. Failure to Act . . . . . . . . . . . . . . . . . . . . 45
Section 9.8. Resignation or Removal of Agent . . . . . . . . . . . 45
Section 9.9. Pro Rata Application of Payments . . . . . . . . . . . 45
Exhibit 1 -- Promissory Note
Exhibit 2 -- Stock Pledge Agreement
Exhibit 3 -- Form of Opinion of Hogan & Hartson L.L.P.
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LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is entered into as of this 24th
day of July, 1996, by and among (i) FIRST COASTAL CORPORATION, a Delaware
corporation ("Borrower"), (ii) ANDROSCOGGIN SAVINGS BANK, a Maine savings
bank in mutual form, BANGOR SAVINGS BANK, a Maine savings bank in mutual
form, MACHIAS SAVINGS BANK, a Maine savings bank in mutual form, and NORWAY
SAVINGS BANK, a Maine savings bank in mutual form (collectively, these four
Maine savings banks are sometimes referred to as the "Lenders" or the
"Savings Banks" and individually may be referred to as "Lender" or "Savings
Bank"), and (iii) MACHIAS SAVINGS BANK, in its capacity as agent for the
Lenders (the "Agent").
WHEREAS, Borrower is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, and owns all of the issued and
outstanding stock of Coastal Savings Bank ("Coastal Savings"), a Maine
savings bank in stock form; and
WHEREAS, Borrower intends to recapitalize through a combination of
a loan from the Lenders hereunder in the aggregate principal amount of $4.0
million (the "Loan"), a dividend from Coastal Savings, and a sale of
additional equity securities (such Loan, dividend and sale of equity
securities being hereinafter referred to collectively as the
"Recapitalization") as the means to repay a promissory note of the Borrower
to the Federal Deposit Insurance Corporation (the "FDIC") in the aggregate
principal amount of $9.0 million plus accrued interest (such obligation to
the FDIC is hereinafter sometimes referred to as the "FDIC Note") in complete
satisfaction of all claims of the FDIC against the Borrower and Coastal
Savings under
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Amended and Restated Settlement Agreement dated as of November 23, 1994 (the
"FDIC Settlement Agreement"), and the FDIC Note and related stock pledge
agreement, each of which is to be cancelled; and
WHEREAS, each of the Savings Banks has agreed to lend $1,000,000 to
the Borrower as part of the Recapitalization to facilitate the repayment of
the FDIC Note, subject to the terms and conditions of this Agreement, the
Notes, and the Stock Pledge Agreement referred to and defined herein and
attached hereto as Exhibits;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby mutually agree, intending to be legally bound,
as follows:
ARTICLE I. ISSUANCE, PURCHASE, INTEREST RATE AND REPAYMENT
OF NOTES
Section 1.1. ISSUANCE. (a) Borrower has authorized the issuance
of four promissory notes, each in the form of Exhibit 1 attached to this
Agreement, each in the principal amount of $1,000,000, and each on such terms
and conditions as are contained in the Note (as hereinafter defined) and this
Agreement.
(b) THE CLOSING. Subject to the terms and conditions and on the
basis of the representations and warranties in this Agreement and the Stock
Pledge Agreement, on the Closing Date, Borrower will issue to each of the
Savings Banks, and each of the Savings Banks will purchase
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from Borrower, a promissory note in the principal amount of $1,000,000
(individually, a "Note") (collectively, the four Notes are sometimes referred
to as the "Notes"). The obligations to purchase the Notes shall be several,
but the obligations of each Savings Bank shall be contingent upon the
purchase of $4 million of Notes in the aggregate on the terms set forth in
this Agreement.
(c) INVESTMENT. Each Savings Bank is making its purchase for its
own account for investment and with no intention of distributing or reselling
the Note purchased by it. A Note may not be transferred, sold or assigned,
other than by operation of law, by any Savings Bank without the prior written
consent of the Borrower.
Section 1.2. PURPOSE OF NOTE PURCHASE. Subject to the terms and
conditions hereof, each Savings Bank shall pay its $1,000,000 purchase price,
in the aggregate amount of $4,000,000 from all Savings Banks, to Borrower on
the Closing Date in immediately available funds. All of such proceeds shall
be used by Borrower solely for the purpose of the repayment of the FDIC Note.
Section 1.3. TERM OF LOAN; REPAYMENT OF PRINCIPAL. Commencing on
June 30, 1998, and continuing semi-annually on each December 31 and June 30
thereafter until the Maturity Date (as defined below), Borrower shall pay to
each Savings Bank a principal payment of $50,000; the entire remaining
principal balance of each Note shall be paid to each Savings Bank on December
31, 2001 (the "Maturity Date"). The final payment of the remaining principal
balance of the Notes shall be accompanied by the payment of all accrued but
unpaid interest with respect to the principal balance outstanding prior
thereto.
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Section 1.4. PREPAYMENT. Borrower may prepay the Notes in whole
or in part at any time at its option upon not less than three Business Days
(as hereinafter defined) prior written notice to the Savings Banks,
specifying the date and the amount of prepayment, and upon the payment of all
accrued but unpaid interest on the amount prepaid to the date of such
prepayment, provided that each such optional principal prepayment shall be in
a minimum aggregate amount of $100,000, and shall be applied to the Notes on
a pro rata basis, in accordance with the principal amount outstanding under
each Note; provided further, that any optional prepayment during the first
three years following the Closing Date shall be accompanied by a prepayment
premium as follows: 5% of the outstanding principal amount of the Notes
prepaid as to any prepayments during the first year following the Closing
Date; 4% of the outstanding principal amount of the Notes prepaid as to any
prepayments during the second year following the Closing Date; and 3% of the
outstanding principal amount of the Notes prepaid as to any prepayments
during the third year following the Closing Date.
Section 1.5. INTEREST. (a) Each of the Notes shall bear
interest on the outstanding principal balance thereunder from the date of
issuance until payment in full of the unpaid principal amount, at a rate per
annum equal to 10.85%, computed on the basis of a year of 365 days ("the
Interest Rate"). Interest shall be payable quarterly, in arrears, on the last
day of each calendar quarter commencing on September 30, 1996 and continuing
on each December 31, March 31, June 30 and September 30 thereafter and on
the Maturity Date.
(b) If the Borrower fails to pay any installment of principal
and\or interest on the date such installment payment is due (other than
payment in full of the principal balance of the Notes whether by acceleration
or at the Maturity Date), and such failure continues for more than
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five (5) Business Days, the Borrower shall pay a late charge equal to five
percent (5%) of the total amount of such delinquent installment payment.
(c) If at any time the Interest Rate provided for herein shall be
deemed by any competent court of law, governmental agency or tribunal to
exceed the maximum rate of interest permitted by any applicable laws
(including in such computation any other fee or charges or other requirements
imposed on Borrower hereunder, and deemed interest by said court, agency or
tribunal), then, for such time as the rate would be deemed excessive, its
application shall be suspended and there shall be charged instead the maximum
rate of interest permissible (including in such computation all fees, charges
or other requirements imposed on Borrower hereunder and deemed interest by
said court, agency or tribunal).
Section 1.6. FEES. In addition to payments of interest and the
payment of expenses as set forth in this Agreement, Borrower agrees to pay to
each of the Savings Banks a fee in the amount of $5,000, payable on the
Closing Date.
Section 1.7. METHOD OF PAYMENT. Whenever any payment of
principal, interest or fees to be made hereunder or under the Notes becomes
due on a day other than a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the amount of interest then to be paid. All
payments and prepayments hereunder shall be made by wire transfer to each
Lender, at its respective account specified on the signature page hereof, or
to such other account as such Lender shall specify in writing to the
Borrower, without offset or counterclaim, in such money of the United States
as at the time of payment shall be legal tender for the payment of public and
private debts and in immediately available funds. Each payment shall be
received by each Lender
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no later than 2:00 p.m., Eastern Time (standard or daylight, as in effect)
and any payment received after such time shall be treated as received on the
next Business Day.
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ARTICLE II. SECURITY
Section 2.1. BORROWER SECURITY INTERESTS. In order to secure all
obligations of Borrower under this Agreement and under the Notes, whether now
existing or hereafter incurred, Borrower grants to the Agent, pursuant to the
Stock Pledge Agreement, a security interest in all of the Borrower's right,
title and interest in and to all of the Pledged Stock (as defined in the
hereinafter described Stock Pledge Agreement), all in accordance with and
subject to the terms of the Stock Pledge Agreement in the form attached
hereto as Exhibit 2 (the "Stock Pledge Agreement").
Section 2.2. PERFECTION AND ADMINISTRATION. In order to perfect
the rights of the Agent, on behalf of the Savings Banks, in the security
interest granted under the Stock Pledge Agreement, and to assure to the
Agent, on behalf of the Savings Banks, the further protection and effective
administration of the interests hereunder, Borrower shall:
(a) deliver to the Agent, as agent for each of the Savings Banks,
the certificates representing the Pledged Stock to hold on behalf of the
Savings Banks, and execute and deliver to the Agent any assignment,
endorsement, instrument or other writing that the Agent may reasonably
determine to be necessary or convenient in order to perfect or protect the
security interests in or liens on, or facilitate the collection of, the
Pledged Stock, or otherwise to carry out the terms of this Agreement or the
Stock Pledge Agreement; and
(b) upon the occurrence and during the continuance of any Event of
Default (as hereinafter defined), permit the Agent, the Savings Banks or
their agents reasonable access during business hours to the books, records,
receipts and all other data of Borrower, Coastal
7
Savings, and any other Borrower Subsidiary (as hereinafter defined), to
review all such books, records, receipts and other data, and to make extracts
therefrom; provided that the Agent and the Savings Banks shall not make
confidential information available to third Persons except as may be required
by law.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
In order to induce the Savings Banks to enter into this Agreement,
and except as set forth in the Borrower Disclosure Schedules previously
furnished to the Lenders, the Borrower hereby warrants and represents the
following to the Savings Banks, as of the date of this Agreement:
Section 3.1. ORGANIZATION. (a) The Borrower is duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. The Borrower has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary, except
where the failure to be so licensed, qualified or in good standing would not
have a material adverse effect on the business, financial condition or
results of operations of the Borrower and the Borrower Subsidiaries taken as
a whole. The Borrower is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). Other than (i) as
set forth in Borrower Disclosure Schedule 3.1(a) and
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(ii) shares of capital stock in Coastal Savings and the Borrower
Subsidiaries, as defined in 3.1(b) below, and (iii) shares of common stock in
the Federal Home Loan Bank of Boston, the Borrower does not own or control or
have the right to acquire, directly or indirectly, an equity interest in any
Person.
(b) The only subsidiary of the Borrower is Coastal Savings and the only
subsidiary of Coastal Savings is CSC (the subsidiaries of the Borrower and
Coastal Savings are collectively referred to as the "Borrower Subsidiaries").
Each of the Borrower Subsidiaries are corporations (except Coastal Savings,
which is a savings bank) duly incorporated, validly existing and in good
standing under the laws of the State of Maine, has the corporate power and
authority to own or lease all of its properties and assets and to conduct its
business as it is now being conducted, and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed,
qualified or in good standing would not have a material adverse effect on the
business, financial condition or results of operations of the Borrower and
the Borrower Subsidiaries taken as a whole. Coastal Savings is a member in
good standing of the Federal Home Loan Bank of Boston and all eligible
accounts of depositors in Coastal Savings are insured by the Bank Insurance
Fund ("BIF") administered by the FDIC to the fullest extent permitted by law.
(c) The Borrower has heretofore delivered to the Savings Banks true and
complete copies of the certificate of incorporation, organization certificate
or other chartering instrument and bylaws of the Borrower and the Borrower
Subsidiaries in effect on the date hereof. The
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minute books of the Borrower and Coastal Savings contain minutes of all
meetings and consents in lieu of meetings of the board of directors (and any
committee thereof) and of the stockholder(s) of the Borrower and Coastal
Savings recorded therein, which are accurate in all material respects. These
minute books accurately reflect all transactions referred to in such minutes
and consents in lieu of meetings in all material respects and disclose all
material corporate actions of the stockholder(s) and boards of directors of
the Borrower and Coastal Savings and all committees thereof. Except as
reflected in such minute books, there are no minutes of meetings or consents
in lieu of meetings of the boards of directors (or any committee thereof) or
of the stockholder(s) of the Borrower and Coastal Savings.
Section 3.2. AUTHORIZATION. (a) The execution, delivery and
performance of this Agreement, the Notes, the Stock Pledge Agreement and such
other documents as are executed and delivered by the Borrower on the date
hereof pursuant to this Agreement:
(i) are within the corporate powers of Borrower;
(ii) have been duly authorized by all necessary corporate
action of the Borrower;
(iii) do not violate any provision of the Articles of
Incorporation or Bylaws of Borrower or of any law, rule, or regulation, or
any order, writ, judgment, injunction, decree, determination or award of any
court or administrative agency presently in effect and having applicability
to Borrower or Coastal Savings or its assets (including, without limitation,
the Pledged Stock);
(iv) do not violate or result in a breach of or constitute a
default under any indenture, loan or credit agreement, or any other material
agreement, lease or instrument to
10
which Borrower or Coastal Savings is a party or by which they or their
properties may be bound or, to Borrower's knowledge, affected; and
(v) do not result in, or require the creation or imposition
of, any mortgage, deed of trust, pledge, lien, security interest or other
charge or security interest of any nature upon or with respect to any of the
assets owned by Borrower, except for the security interest granted to the
Agent on behalf of the Savings Banks.
(b) (i) To the knowledge of the Borrower, Borrower is in
compliance in all material respects with all applicable laws, rules and
regulations material to its business and all writs, judgments, injunctions,
decrees, determinations or awards applicable to it, except in each case where
failure to so comply would not have a material adverse effect on the
business, financial condition or results of operations of the Borrower and
the Borrower Subsidiaries taken as a whole, and
(ii) Borrower is not in default under any indenture, loan or
credit agreement or any other agreement, lease or instrument, the effect of
which would have a material adverse effect on the business, financial
condition or results of operations of Borrower and the Borrower Subsidiaries
taken as a whole.
Section 3.3. VALIDITY. This Agreement, the Stock Pledge
Agreement, and the Notes have been duly executed and delivered by Borrower
and constitute the legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer or
other similar laws affecting creditors' rights
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generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
Section 3.4. GOVERNMENTAL APPROVALS. Except for any consents and
approvals of, or filings or registrations with, or notices to, the FDIC, the
Board of Governors of the Federal Reserve System (the "FRB"), the
Superintendent of the Bureau of Banking of the State of Maine (the
"Superintendent"), the National Association of Securities Dealers, Inc. and
the Securities and Exchange Commission (the "SEC"), no consents or approvals
of, or filings or registrations with, or notices to any third party or any
public body or authority are necessary on behalf of the Borrower or Coastal
Savings in connection with (a) the valid execution, delivery and performance
by Borrower of this Agreement, the Stock Pledge Agreement, and the Notes, or
(b) the valid consummation of the transactions provided for in the
Recapitalization.
Section 3.5. LITIGATION. There is no action, suit, inquiry,
investigation or proceeding pending or, to the knowledge of the Borrower,
threatened against the Borrower or any Borrower Subsidiary or any of their
respective properties or assets in any court or before any arbitrator of any
kind or before any Person wherein an unfavorable decision, ruling or finding
is reasonably likely to (i) impair the right or ability of the Borrower or
any Borrower Subsidiary to carry on its business substantially as now
conducted, (ii) result in any material adverse change in the business,
results of operations or financial condition of the Borrower and the Borrower
Subsidiaries taken as a whole, or (iii) adversely affect the validity or
enforceability of this Agreement, the Notes or the Stock Pledge Agreement,
the Recapitalization or the transactions contemplated thereby or hereby.
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Section 3.6. RECORDS AND BUSINESS LOCATION. The principal place
of business of Borrower and the office where Borrower keeps its corporate and
accounting records are located at the address stated in Section 8.8 hereof.
Section 3.7. SECURITY INTERESTS. The Stock Pledge Agreement,
together with delivery of the stock certificates, creates a valid and
perfected first-priority security interest and lien in, on and to all of the
Pledged Stock, enforceable against the Pledged Stock in accordance with the
terms hereof and thereof.
Section 3.8. ENCUMBRANCES. Except pursuant to the FDIC
Settlement Agreement, none of the Pledged Stock is subject to any assignment,
lien, security interest, charge or encumbrance (other than in favor of the
Savings Banks pursuant to the Stock Pledge Agreement), and no effective
financing statement or other instrument similar in effect covering any of the
Pledged Stock is on file in any filing or recording office.
Section 3.9. ERISA. With respect to any employee benefit plan
for the benefit of employees of Borrower or any Borrower Subsidiary ("Plan")
that is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and regulations issued pursuant to ERISA, each of Borrower
and the Borrower Subsidiaries is in compliance in all material respects with
the applicable provisions of ERISA; no Plan or related trust has incurred any
"accumulated funding deficiency" as defined in Section 302 of ERISA or
Section 412 of the Internal Revenue Code; no Reportable Event as defined in
Section 4043(b) of ERISA has occurred with respect to any Plan maintained in
whole or in part for employees of Borrower or the Borrower Subsidiaries; and
no provision of this Agreement will result in a Reportable Event or violation
of ERISA.
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Section 3.10. REGULATIONS U AND G. None of the stock of Coastal
Savings constitutes "margin stock" within the meaning of Regulation U or G of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221 and
Part 207, and the transactions under this Agreement are exempted from or in
compliance with the provisions of Regulations U and G.
Section 3.11. FINANCIAL STATEMENTS. (a) The Borrower has
previously delivered or made available to the Savings Banks accurate and
complete copies of the consolidated statements of financial condition of the
Borrower as of December 31, 1993, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
then ended, in each case accompanied by the audit report of Coopers &
Lybrand, L.L.P., independent public accountants with respect to the Borrower,
and the unaudited consolidated statement of financial condition of the
Borrower as of March 31, 1996 and the related unaudited consolidated
statements of operations and cash flows for the three months ended March 31,
1996 and 1995, and the unaudited consolidated statement of changes in
stockholders' equity for the three months ended March 31, 1996. The
consolidated statements of financial condition of the Borrower referred to in
this Agreement (including the related notes, where applicable) present fairly
the consolidated financial condition of the Borrower as of the respective
dates set forth therein, and the related consolidated statements of
operations, stockholders' equity and cash flows (including the related notes,
where applicable) present fairly the consolidated results of operations,
stockholders' equity and cash flows of the Borrower for the respective
periods or as of the respective dates set forth therein.
(b) Each of the financial statements referred to in Section 3.11(a) has
been prepared in accordance with generally accepted accounting principles
consistently applied during the periods
14
involved. The consolidated audits of the Borrower have been conducted in
accordance with generally accepted auditing standards. The books and records
of the Borrower and the Borrower Subsidiaries are being maintained in
material compliance with applicable legal and accounting requirements, and
such books and records accurately reflect in all material respects all
dealings and transactions in respect of the business, assets, liabilities and
affairs of the Borrower and the Borrower Subsidiaries.
(c) As of March 31, 1996, except and to the extent (i) reflected,
disclosed or provided for in the financial statements referred to above and
(ii) of liabilities incurred since March 31, 1996 in the ordinary course of
business, neither the Borrower nor any Borrower Subsidiary has any
liabilities, whether absolute, accrued, contingent or otherwise, material to
the business, financial condition or results of operations of the Borrower
and the Borrower Subsidiaries taken as a whole.
(d) To the knowledge of the Borrower, since January 1, 1993, the
Borrower and each Borrower Subsidiary has duly filed with the Superintendent,
the FDIC, and the FRB in correct form the monthly, quarterly and annual
regulatory reports required to be filed under applicable laws and regulations
and such reports were in all material respects complete and accurate and in
compliance, in all material respects, with the requirements of applicable
laws and regulations, provided that information as of a later date shall be
deemed to modify information as of an earlier date, and the Borrower and each
Borrower Subsidiary has made available to the Savings Banks accurate and
complete copies of all such reports as the Savings Banks have requested.
Section 3.12. TAXES. Borrower and each Borrower Subsidiary has
filed all United States income tax returns and all state and municipal tax
returns which are required to be
15
filed by it, and has paid, or made provision for the payment of, all taxes
which have become due pursuant to said returns or pursuant to any assessment
received by Borrower or any Borrower Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have
been provided.
Section 3.13. COMPLIANCE WITH APPLICABLE LAWS, AGREEMENTS, ETC.
(a) The Borrower and each of the Borrower Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made
all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which is reasonably likely to have a material adverse effect on
the business, financial condition or results of operations of the Borrower
and the Borrower Subsidiaries taken as a whole; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and, to the knowledge of the Borrower, no suspension or cancellation of any
of the same is threatened.
(b) Neither the Borrower nor any Borrower Subsidiary is in violation of
its articles of incorporation, charter or other chartering instrument or
bylaws, or, to the knowledge of the Borrower, any applicable federal, state
or local law or ordinance or any applicable order, rule or regulation of any
federal, state, local or other governmental agency or body (including,
without limitation, all applicable banking, securities, municipal securities,
safety, health, environmental, zoning, anti-discrimination, antitrust, and
wage and hour laws, ordinances, orders, rules and regulations), or in default
with respect to any order, writ, injunction or decree of any court applicable
to it, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults is reasonably likely
to have a material adverse effect
16
on the business, financial condition or results of operations of the Borrower
and the Borrower Subsidiaries taken as a whole; and neither the Borrower nor
any Borrower Subsidiary has received notice or any communication asserting
that the Borrower or any Borrower Subsidiary is in violation of, and the
Borrower does not have knowledge of any violation of, any of the above.
Except as set forth in Borrower Disclosure Schedule 3.13(b), neither the
Borrower nor any Borrower Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum
of understanding or written commitment and none of them has received any
written communication requesting that they enter into any of the foregoing.
Section 3.14. ABSENCE OF ADVERSE CHANGES. Since December 31,
1995, no event or events involving the Borrower or a Borrower Subsidiary have
occurred which, in the aggregate, (i) have a material adverse effect on the
business, financial condition or results of operations of the Borrower and
the Borrower Subsidiaries taken as a whole, or (ii) materially impair the
ability of the Borrower to perform its obligations under this Agreement, the
Stock Pledge Agreement, and the Notes, or the consummation of any of the
transactions contemplated hereby or thereby or the Recapitalization, and, to
the knowledge of the Borrower, no fact or condition now exists that is
reasonably likely to cause such a material adverse change to occur in the
future.
Section 3.15. ACCURACY OF STATEMENTS. All statements,
representations and warranties made by the Borrower in this Agreement, the
Stock Pledge Agreement and the Notes and in any other agreement, document,
certificate or instrument delivered or to be delivered by or on behalf of the
Borrower under this Agreement, the Stock Pledge Agreement and the Notes are
and shall be true, correct and complete in all material respects on the date
made and on and as of
17
the Closing Date and no information has been or will be omitted therefrom
which would make any of them misleading or incomplete in any material respect
as at each such date. It is understood by the Borrower that all such
statements, representations and warranties shall be deemed to have been
relied on by the Savings Banks as a material inducement to the making of the
Loan.
Section 3.16. ENVIRONMENTAL MATTERS. For purposes of this Section
3.16, the following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Materials
of Environmental Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, ET SEQ; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001,
ET SEQ; the Safe Drinking Water Act, 42 U.S.C. Section 300f, ET SEQ; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may
18
impose strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Materials of Environmental Concern.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Materials of Environmental Concern" means pollutants, contaminants,
hazardous wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned, leased or operated by the Borrower or any Borrower Subsidiary,
including those properties serving as collateral for any loans made and retained
by the Borrower or any Borrower Subsidiary or for which the Borrower or any
Borrower Subsidiary serves in a trust relationship for the loans retained in
portfolio.
(a) To the knowledge of the Borrower, and except as set forth in Borrower
Disclosure Schedule 3.16(a), the Borrower and each Borrower Subsidiary is in
compliance with all Environmental Laws, except for any violations of any
Environmental Law which would not, singly or in the aggregate, have a material
adverse effect on the business, financial condition or results of operations of
the Borrower and the Borrower Subsidiaries taken as a whole. Neither the
Borrower nor any Borrower Subsidiary has received any communication alleging
that the Borrower or any Borrower Subsidiary is not in such compliance and, to
the knowledge of the
19
Borrower, there are no present circumstances that would prevent or materially
interfere with the continuation of such compliance.
(b) To the knowledge of the Borrower, neither the Borrower nor any
Borrower Subsidiary has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which would not,
singly or in the aggregate, have a material adverse effect on the business,
results of operations, or financial condition of the Borrower and the
Borrower Subsidiaries taken as a whole.
(c) To the knowledge of the Borrower, none of the Loan Portfolio
Properties and Other Properties Owned has been or is in violation of or
liable under any Environmental Law, except any such violations or liabilities
which singly or in the aggregate would not have a material adverse effect on
the business, financial condition or results of operations of the Borrower
and the Borrower Subsidiaries taken as a whole.
(d) To the knowledge of the Borrower, there are no actions, suits,
demands, notices, claims, investigations or proceedings pending or threatened
relating to the liability of the Loan Portfolio Properties and Other
Properties Owned under any Environmental Law, including without limitation
any notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liabilities under or
violations of Environmental Law, except such which would not have or result
in a material adverse effect on the business, financial condition or results
of operations of the Borrower and the Borrower Subsidiaries taken as a whole.
(e) To the knowledge of the Borrower, there are no past or present
actions, activities, conditions, events or incidents that could reasonably
form the basis of any Environmental Claim
20
against the Borrower or any Borrower Subsidiary or against any Person whose
liability for any Environmental Claim the Borrower or any Borrower Subsidiary
has retained or assumed either contractually or by operation of law, except
such which would not have a material adverse effect on the business,
financial condition or results of operations of the Borrower and the Borrower
Subsidiaries taken as a whole.
(f) The Borrower has set forth on Borrower Disclosure Schedule 3.16(f)
any environmental studies conducted by it or any of its subsidiaries during
the past five years with respect to any properties owned by it as of the date
hereof.
Section 3.17. ALLOWANCES FOR LOSSES AND REAL ESTATE OWNED. The
allowance for loan losses reflected on the consolidated balance sheets
included in the Borrower's financial statements referred to in Section
3.11(a) is adequate in all material respects as of their respective dates
under the requirements of generally accepted accounting principles to provide
for reasonably anticipated losses on outstanding loans net of recoveries and
foreclosed real estate, respectively. The Real Estate Owned, in the
aggregate, reflected on the consolidated balance sheets included in the
Borrower's financial statements referred to in Section 3.11(a) is carried at
the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.1. CONDITIONS PRECEDENT TO CLOSING THE PURCHASE. The
obligations of each of the Savings Banks to perform under this Agreement are
subject to satisfaction by the
21
Borrower, on or prior to the Closing Date, in form and substance satisfactory
to the Savings Banks and to their special counsel, Luse Lehman Gorman
Pomerenk & Schick, of each of the following:
(a) the Savings Banks shall have received the following documents:
(i) five original copies of this Agreement, executed by
Borrower and the Savings Banks;
(ii) five original copies of the Stock Pledge Agreement,
executed by Borrower;
(iii) the Notes, executed by Borrower;
(iv) (A) a certificate of legal existence, issued by the
appropriate state officer with respect to the good standing of Borrower and
each Borrower Subsidiary and its charter documents on file and (B) a
certificate of the appropriate state authorities as to the Borrower and each
Borrower Subsidiary with respect to the payment of all taxes necessary to
maintain its good standing;
(v) copies, certified by its Secretary, of the articles of
incorporation and bylaws of Borrower and Coastal Savings, with any amendments
thereto;
(vi) resolutions or other appropriate authorizations of
Borrower certified by its Secretary, authorizing the execution, delivery and
performance, as applicable, of this Agreement, the Notes, the Stock Pledge
Agreement, and any other documents necessary for performance of the
obligations of Borrower under this Agreement;
(vii) certificates, executed by its Secretary, as to the
incumbency and authenticity of signatures of the officers of Borrower
executing this Agreement, the Notes, and
22
the Stock Pledge Agreement any other documents required as conditions
precedent under this Section;
(viii) such certificates of its officers or others and such
other documents as to the accuracy of the representations set forth herein
and to evidence fulfillment of the conditions set forth in this Article IV as
the Savings Banks and their counsel may reasonably request;
(ix) a certificate or certificates in the name of Borrower
representing all outstanding stock of Coastal Savings, accompanied by a stock
power, executed by Borrower in blank, with respect to each such certificate;
(x) An opinion of counsel for Borrower in the form attached
hereto as Exhibit 3;
(xi) A copy of all consents and approvals issued by, and all
filings and registrations with, and all notices to, governmental agencies in
connection with the consummation of the Recapitalization, and the
transactions provided for in this Agreement, including, without limitation,
an executed acknowledgment from the FDIC as to the payment in full of and the
satisfaction of all claims and rights under the FDIC Note, the Pledge
Agreement with the FDIC and related documents; and
(xii) a Regulation U-1 Form with respect to each of the
Notes, completed and executed as to Part 1 by Borrower.
(b) The Recapitalization shall be effected as of the Closing Date,
and a minimum of $2.7 million of additional net equity shall have been
obtained by the Borrower through the sale of additional shares of its common
stock.
23
(c) No order, judgment or decree shall be outstanding against a
party hereto or a third party that would have the effect of preventing
completion of the Recapitalization, this Agreement and the transactions
contemplated hereby and thereby; no suit, action or other proceeding shall be
pending or threatened by any governmental body in which it is sought to
restrain or prohibit the Recapitalization, this Agreement and the
transactions contemplated hereby and thereby; and no suit, action or other
proceeding shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit the Recapitalization, this Agreement and
the transactions contemplated hereby and thereby, or to obtain substantial
monetary or other relief against one or more parties hereto in connection
with the Recapitalization or this Agreement and which any of the Savings
Banks determines in good faith, after consulting with counsel, that it is
inadvisable to proceed with the Loan because any such suit, action or
proceeding is reasonably likely to have, in the opinion of the Savings Banks,
a material adverse effect on the Borrower or any party hereto.
(d) All regulatory approvals as shall be necessary in the opinion
of counsel to the Savings Banks shall have been obtained by the Borrower
(provided that no approval or consent referred to in this Section 4.1 shall
be deemed to have been obtained if it shall include any term, condition or
requirement that, individually or in the aggregate, would result in a
material adverse effect on the business, financial condition or results of
operations of the Borrower on a consolidated basis, in so significant a
manner that a Savings Bank, in its reasonable judgment, would not have
entered into this Agreement),
(e) There shall exist no Event of Default or Incipient Default
under this Agreement.
24
(f) There shall have been delivered to the Savings Banks, in
addition to the fees set forth in Section 1.6 of this Agreement, payment (i)
for the expenses incurred by them in connection with their due diligence in
connection with entering into this Agreement, and (ii) for legal fees and
expenses incurred by them in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Stock Pledge Agreement, the
Notes, and related matters and documents; provided, however, that the
aggregate amount that Borrower shall be obligated to pay under this
subparagraph (f) shall not exceed, without the prior written approval of
Borrower, $50,000, of which $5,000 has already been paid.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until all of its obligations
hereunder, under the Notes and under the Stock Pledge Agreement, have been
satisfied in full, and in the absence of prior written consent of at least
three of the Savings Banks, which written consent may be given through the
Agent:
Section 5.1. EXISTENCE AND GOOD STANDING. Borrower shall do or,
with respect to each of the Borrower Subsidiaries, cause to be done, all
things necessary (a) to preserve and keep in full force and effect its
corporate existence, material rights, and material licenses and comply with
all applicable laws and all rules, regulations and orders of federal, state
and local regulatory bodies having jurisdiction applicable to it,
noncompliance with which would have a material adverse effect upon the
business, financial condition, or results of operations of the Borrower and
the Borrower Subsidiaries taken as a whole; (b) to maintain and protect its
25
properties used in the conduct of its operations in a commercially reasonable
manner; (c) to conduct its operations and continue the conduct of its
business without any substantial change in the general nature of such
operations or business from that in effect on the Closing Date; and (d) to
maintain its principal place of business as set forth at Section 3.6 hereof;
provided that upon ten (10) days written notice to the Savings Banks,
Borrower may change its principal place of business.
Section 5.2. TAXES AND CHARGES. Borrower shall, and shall cause
each of the Borrower Subsidiaries to, timely file returns and pay and
discharge all taxes, assessments and governmental fees, charges or levies
imposed upon it or its income or profits or upon its properties or any part
thereof, before the same shall be in default, as well as all lawful claims
which, if unpaid, might become a lien or charge upon such properties or any
part thereof; provided, however, that Borrower and the Borrower Subsidiaries
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings
and Borrower or the Borrower Subsidiaries, as applicable, shall have set
aside on its books adequate reserves therefor.
Section 5.3. INSURANCE. Borrower shall, and shall cause each of
its Subsidiaries to, maintain insurance with responsible companies in such
amounts and against such risks as it presently insures against, including,
without limitation, casualty, liability, and deposit insurance and, in any
event, as would be reasonably prudent for companies in the same or similar
businesses. Copies of all said policies or certificates thereof, including
all endorsements, shall be delivered to the Savings Banks upon written
request by the Agent.
26
Section 5.4. FINANCIAL STATEMENTS. (a) Borrower shall deliver
or cause to be delivered to the Agent on behalf of the Savings Banks:
(i) Within 45 days after the end of each calendar quarter
(except as provided in (ii) below) on a consolidated basis for Borrower (A) a
balance sheet as at the end of such period and statements of operations and
cash flow, and such other quarterly statements as are customarily prepared by
it on a quarterly basis, (B) a report setting forth in reasonable detail loan
delinquencies, non-accrual loans and loan charge-offs; and (C) upon the
written request of the Agent and with reasonable notice, such other quarterly
financial statements and information as the Savings Banks may reasonably deem
necessary to provide current financial information;
(ii) As soon as reasonably available, but in no event more
than 90 days after the end of each fiscal year ending on or after December
31, 1995 and until the Maturity Date, audited consolidated financial
statements of the Borrower for the fiscal year then ended.
(iii) As promptly as practicable after filing, copies of all
call reports filed with the FDIC, the FRB, or the Bureau of Banking of the
State of Maine, and the reports and statements filed by the Borrower with the
SEC as a result of having a class of securities registered under Section 12
of the Securities Exchange Act of 1934, as amended, between the date of this
Agreement and the Maturity Date.
(iv) Concurrently with the delivery of the financial
statements required under subsections (a)(i) and (a)(ii) of this Section, a
certificate of its chief financial officer or such other person as may be
approved by the Agent in writing stating that, to the knowledge of such
officer or other person, (x) such financial statements have been prepared in
accordance with GAAP, except that as to interim financial information, such
certificate may state that the financial
27
statements have been prepared in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X and accordingly, do not include all of
the information and footnotes required by GAAP for complete financial
statements; and (y) whether there exists an Event of Default or an event
which with notice or lapse of time or both would become an Event of Default
("Incipient Default").
(b) If an Event of Default has occurred and is continuing, the
Borrower shall deliver or cause to be delivered to the Agent, within 30 days
after the end of each month, (i) a consolidated balance sheet as at the end
of such period and a consolidated statements of operations, and such other
monthly statements as are customarily prepared by it and by Coastal Savings
on a monthly basis, (ii) a report setting forth in reasonable detail loan
delinquencies, non-accrual loans and loan charge-offs; and (iii) upon the
written request of the Agent and with reasonable notice, such other monthly
financial statements and information as the Agent may reasonably deem
necessary to provide current financial information, all warranted as to
accuracy by its chief financial officer or such other person as may be
approved by the Agent in writing;
(c) In the event that, during the continuance of an Event of
Default the Agent does not receive the information required under subsections
(a)(i), (ii) and (iii), and (b) of this Section within ten (10) Business Days
of the date such information is required to be delivered, and if the Agent
reasonably concludes, as evidenced by the written notice to Borrower, it
necessary to cause persons other than Borrower and its agents to prepare such
statements, Borrower shall pay all actual and reasonable out-of-pocket costs
and expenses of the Agent in connection with the Agent's obtaining such
statements, including the costs of any audit undertaken at the request of the
Agent to obtain such information.
28
Section 5.5. REPORTS. Borrower shall deliver to the Agent, on
behalf of the Savings Banks, in reasonable detail, as soon as possible, and,
in any event, within five (5) Business Days after Borrower receives notice or
knowledge thereof, a statement executed by an officer of Borrower with
respect to (i) the occurrence of any Event of Default or Incipient Default or
failure to observe any covenant set forth herein and any action taken or
contemplated with respect thereto, and (ii) (A) the existence or change in
status of any pending or threatened litigation or administrative proceedings
or investigations against the Borrower or any Borrower Subsidiary which, if
determined adversely to Borrower, would have a material adverse effect upon
the financial condition or results of operations of Borrower and the Borrower
Subsidiaries taken as a whole, and (B) any reserves set aside or to be set
aside in connection with such proceedings, in accordance with GAAP.
Section 5.6. CAPITAL MAINTENANCE REQUIREMENTS. (a)
Borrower shall maintain a leverage ratio, as defined in 12 C.F.R. 325.2, of
at least 4.0%, and shall satisfy all other capital requirements imposed on it
by the FRB, the Superintendent, the FDIC or any other bank regulatory
authority having jurisdiction over the Borrower, provided that in no event
shall the Borrower's capital ratios be less than that required for the
Borrower to qualify as "adequately capitalized," as defined in 12 C.F.R.
Section 325.103(b); provided, however, that in the event that the capital
ratio requirements for qualifying as "adequately capitalized" shall be
increased and such increase shall apply to Borrower, Borrower shall have a
period equal to the greater of (i) one year, or (ii) the time allowed in the
regulation adopting such increase, to comply with the revised definition of
"adequately capitalized."
29
(b) Coastal Savings shall maintain a leverage ratio, as defined in
12 C.F.R. 325.2, of at least (i) 7.25% on the Closing Date, and (ii) 6.0%
from and after the Closing Date, and shall satisfy all other capital
requirements imposed on it by the FRB, the Superintendent, the FDIC or any
other bank regulatory authority having jurisdiction over the Borrower or
Coastal Savings, provided that in no event shall Coastal Savings' capital
ratios be less than that required for it to qualify as "adequately
capitalized," as defined in 12 C.F.R. Section 325.103(b); provided, however,
that in the event that the capital ratio requirements for qualifying as
"adequately capitalized" shall be increased and such increase shall apply to
Coastal Savings, Coastal Savings shall have a period equal to the greater of
(i) one year, or (ii) the time allowed in the regulation adopting such
increase, to comply with the revised definition of "adequately capitalized."
ARTICLE VI. NEGATIVE COVENANTS
Borrower covenants and agrees that, until such time as Borrower's
obligations hereunder, under the Notes, and under the Stock Pledge Agreement
have been satisfied in full and in the absence of prior written consent of at
least three of the Savings Banks, which written consent may be given through
the Agent:
Section 6.1. MERGERS AND RELATED TRANSACTIONS. Borrower shall
not, nor shall any Borrower Subsidiary, merge into or consolidate (including
any sale of all or more than 50% of the assets of the Borrower or Coastal
Savings) with or into any other Person, unless prior to such merger or
consolidation the Notes are paid in full with respect to principal and any
interest
30
due thereunder. The foregoing shall not apply to any merger or consolidation
involving only (i) the Borrower and one or more Borrower Subsidiary, or (ii)
two or more Borrower Subsidiaries.
Section 6.2. STOCK AND DIVIDENDS. Borrower shall not (i) apply
any property or assets to the purchase, retirement or redemption of any
shares of its capital stock; or (ii) declare or pay cash dividends on any
shares of its capital stock or make any other distributions in respect of its
capital stock (other than dividends or distributions payable solely in shares
of its capital stock), if at the time of such action and after giving effect
thereto:
(1) an Event of Default or an Incipient Default shall have
occurred and be continuing; or
(2) the Borrower's debt to equity ratio on a parent only basis is
greater than 30%.
Section 6.3. ENCUMBRANCES AND INDEBTEDNESS. Neither Borrower nor
Coastal Savings shall:
(a) create or incur any indebtedness for borrowed money
(including, without limitation, obligations under capital leases) or any
mortgage, deed of trust, security interest or other encumbrance upon any of
its real or personal properties, whether now owned or hereafter acquired,
except for
(i) indebtedness to and encumbrances granted to the Savings
Banks under this Agreement,
(ii) liens for taxes not yet due or contested in good faith
by appropriate proceedings,
(iii) indebtedness in an aggregate amount not to exceed
$1,000,000,
31
(iv) indebtedness of Borrower to any Borrower Subsidiary, and
(v) as to Coastal Savings, advances from the Federal Home
Loan Bank of Boston, deposits, advances from the Federal Reserve Bank of
Boston for liquidity purposes (through the advance window), repurchase
agreements with other financial service companies, and other borrowings
incurred in the ordinary course of business.
Section 6.4. SALES AND DISPOSITIONS. Neither Borrower nor any
Borrower Subsidiary shall sell, transfer, lease, assign or otherwise dispose
of any material portion of its assets, except in the ordinary course of
business or as permitted under Section 6.1 hereof.
Section 6.5. OWNERSHIP OF SUBSIDIARIES. Borrower shall, at no
time, own less than 100% of the issued and outstanding stock of Coastal
Savings.
Section 6.6. CAPITAL EXPENDITURES. Borrower shall not incur
capital expenditures in excess of $500,000 in the aggregate in any fiscal
year.
Section 6.7. FINANCIAL REQUIREMENTS. Borrower, on a consolidated
basis, shall not cause or suffer its net worth to be less than $6,500,000.
ARTICLE VII. DEFAULT
Section 7.1. EVENTS OF DEFAULT. Each of the following events
shall constitute an Event of Default hereunder if such event shall not be
remedied within the time period set forth below, unless Borrower receives the
prior written consent of at least three of the Savings Banks, which written
consent may be given through the Agent:
32
(a) Borrower shall fail to pay any amount of principal, interest,
fees, or other payments due hereunder or under the Notes when such amount is
due and payable and such failure continues for more than five (5) Business
Days;
(b) Borrower or any Borrower Subsidiary (i) shall fail to pay any
indebtedness aggregating $350,0000 or more, when due, which is not waived
(whether such payment is due by scheduled maturity, by required prepayment,
by acceleration, by demand or otherwise); or (ii) shall fail to perform any
term, covenant or agreement on its part to be performed under any agreement
or instrument evidencing or securing or relating to any such indebtedness or
any guaranty when required to be performed, if the effect of such failure is
to accelerate, or to permit the holder or holders of such indebtedness or the
trustees under any such agreement or instrument to accelerate, the maturity
of such indebtedness or such obligation guaranteed by Borrower or any
Borrower Subsidiary;
(c) any representation or warranty made by Borrower as to the
Borrower or Coastal Savings in this Agreement, the Stock Pledge Agreement, or
any certificate, agreement, instrument, report or statement contemplated by
or made or delivered pursuant to or in connection with this Agreement or any
other agreement with the Savings Banks to which Borrower is a party, shall
be, at the time of the making of such representation or warranty, incorrect
in any material respect; PROVIDED, HOWEVER, that notwithstanding anything to
the contrary contained in this Section 7.1(c), no Event of Default shall be
deemed to have occurred under this Section 7.1(c) even if such
representations or warranties (other than the representations or warranties
contained in Sections 3.2(a)(i) and (ii), 3.3, 3.5, 3.7 and 3.8) are not true
and correct unless the failure of any of the representations or warranties to
be so true and correct
33
would have, individually or in the aggregate, a material adverse effect on
the business, financial condition or results of operations of the Borrower
and the Borrower Subsidiaries taken as a whole.
(d) Borrower shall fail to observe or perform any covenant or
agreement contained in (i) the corporate existence clause of Section 5.1(a),
Section 5.6 and Sections 6.1 through 6.7 hereof, or the Stock Pledge
Agreement, or (ii) Sections 5.4(a) and 5.5, and such failure shall continue
for more than ten (10) Business Days, or (iii) other provisions of Article V
of this Agreement (other than the Sections or paragraphs specified above),
and such failure continues for more than thirty (30) days. It is understood
and agreed, however, that notwithstanding the provisions of this Section
7.1(d), the Borrower shall not be deemed to have failed to observe or perform
the covenant contained in Section 6.7 hereof unless such failure continues
for more than 90 days PROVIDED THAT during such 90-day period, (i) the
Borrower shall have provided to the Agent, on behalf of the Lenders, no later
than 30 days following Borrower's obtaining knowledge of its failure to
satisfy Section 6.7, a written plan for satisfying the provisions of Section
6.7, (ii) the Borrower shall have provided to the Agent, on behalf of the
Lenders, no later than 60 days following Borrower's obtaining knowledge of
its failure to satisfy Section 6.7, the terms of a specific proposal to
satisfy Section 6.7 which proposal shall be deemed reasonably viable and
likely to occur within such 90-day period, in the reasonable judgement of the
Agent on behalf of the Lenders; and (iii) no other Event of Default shall
have occurred and is continuing;
34
(e) Borrower or any Borrower Subsidiary shall generally not pay
its debts as they become due or admit in writing its inability generally so
to pay its debts, make an assignment for the benefit of creditors, seek an
order for relief in bankruptcy become insolvent or bankrupt within the
meaning of the Federal Bankruptcy Code, petition or apply to any tribunal for
the appointment of any receiver, custodian, liquidator, trustee, or similar
official (hereinafter "Official") for it or any substantial part of its
property, commence any proceeding relating to it under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction (including, without limitation, the Federal Bankruptcy
Code, the Federal Deposit Insurance Act, and the Maine Banking Code) or there
shall be commenced against it any such proceeding which remains unstayed or
undismissed for a period of more than sixty (60) days, or it shall consent
to, approve of or acquiesce in any such proceeding or the appointment of any
such Official, or it shall suffer any such proceeding to continue
undischarged for a period of more than sixty (60) days;
(f) Borrower or any Borrower Subsidiary shall suffer the entry of
judgments against it for the payment of money in excess of $500,000 in the
aggregate at any one time by any court of record or shall suffer the issuance
of any writs of attachment on any of its assets having values in the
aggregate at any one time of greater than $500,000, and Borrower or such
Borrower Subsidiary shall not discharge the same or provide for their
discharge in accordance with their terms, or procure a stay of execution
thereon within thirty (30) days from the date of entry thereof, unless
execution thereon is effectively stayed pending further proceedings; or
35
(g) any security interest or lien granted herein or to be granted
hereunder in the Pledged Stock shall for any reason cease to be a valid and
perfected security interest or lien having first priority.
Section 7.2. ACCELERATION. Upon the occurrence of any Event of
Default the Agent shall, at the direction of at least Three Fourths of the
Savings Banks, by written notice to Borrower, declare the entire indebtedness
of Borrower then outstanding under the Notes immediately due and payable
without presentment, demand, protest, notice of protest or any other notice
of any kind, all of which are hereby expressly waived. Notwithstanding the
foregoing provisions of this Section, the entire indebtedness of Borrower
then outstanding under the Notes shall become immediately due and payable
without notice or election of any kind and without need for any action by the
Agent or Savings Banks if there shall occur an Event of Default under Section
7.1(e) of this Agreement.
Section 7.3. RIGHT OF SETOFF. Upon the occurrence and during the
continuance of any Event of Default, each of the Savings Banks is hereby
authorized at any time and from time to time, without prior notice to
Borrower (any such prior notice being expressly waived by Borrower), to set
off and apply any and all money or other property at any time held, and other
indebtedness at any time owing, by any Savings Bank to or for the credit or
the account of Borrower or any Borrower Subsidiary against any and all of the
obligations of Borrower, first under this Agreement and second under any
other Agreement with Borrower, irrespective of whether or not the Savings
Banks shall have made any demand under this Agreement or the Notes, and
although such obligations may be unmatured. The Savings Banks agree promptly
to notify Borrower after any such setoff and application, provided that the
failure to give such notice
36
shall not affect the validity of such setoff and application. If a Savings
Bank shall effect payment of any principal of or interest on a Note held by
it under this Agreement through the exercise of any right of set-off,
banker's lien, counterclaim or similar right, it shall promptly pay to the
other Savings Bank holders of the Notes such amounts, and make such other
adjustments from time to time as shall be equitable to the end that the
Savings Banks shall share the benefit of such payment pro rata in accordance
with the unpaid principal and interest on the Note held by each of them. To
such end the Savings Banks shall make appropriate adjustments among each
Savings Bank if such payment is rescinded or must otherwise be restored.
Nothing contained herein shall require any Savings Bank to exercise any such
right or shall affect the right of any Savings Bank to exercise and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower. The rights of the Savings Banks
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Savings Banks may have.
Section 7.4. RIGHTS TO PLEDGED STOCK. Upon the occurrence of any
Event of Default, the Agent (on behalf of the Lenders) shall have all rights
with respect to the Pledged Stock set forth in the Stock Pledge Agreement.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. RIGHTS AND WAIVERS. All rights, remedies and powers
granted to the Agent and the Savings Banks, in this Agreement, the Notes, or
the Stock Pledge Agreement, or any other instrument or document delivered
hereunder, whether express or implied, shall be
37
cumulative and may be exercised singly or concurrently with such other rights
as the Agent or the Savings Banks may have, and shall include, without
limitation, the right to apply to a court of equity for any injunction to
restrain a breach or threatened breach of this Agreement and all rights as
stated in Article VII hereof. No failure or delay on the part of the Agent
or the Savings Banks in exercising any right, power or privilege hereunder,
under the Notes, the Stock Pledge Agreement, or any other instrument or
document issued in connection herewith, or under applicable law, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. No waiver or modification of any right, power or privilege of the
Agent or the Savings Banks, or of any obligation of Borrower hereunder, under
the Notes or the Stock Pledge Agreement shall be effective unless such waiver
or modification is in writing, signed by the Savings Banks or the Agent and
then only to the extent set forth therein. A waiver by the Agent or the
Savings Banks of any right, power or privilege hereunder on any one occasion
shall not be construed as a bar to, or a waiver of, any such right, power or
privilege which the Agent or the Savings Banks otherwise would have on any
subsequent occasion.
Section 8.2. BINDING EFFECT; ASSIGNMENT. This Agreement shall
bind and inure to the benefit of the parties, their legal representatives,
successors and assigns, provided, however, that that Borrower may not assign
or transfer its rights hereunder or any interests herein without the prior
written consent of the Savings Banks, and the Savings Banks may not transfer
a Note or any interest therein without the prior written consent of the
Borrower.
Section 8.3. SEVERABILITY. Any provision of this Agreement
prohibited by the laws of any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibi-
38
tion, or modified to conform with such laws, without invalidating the
remaining provisions of this Agreement, and any such prohibition in any
jurisdiction shall not invalidate such provisions in any other jurisdiction.
Section 8.4. INTERPRETATION. Article and Section headings used
herein are for convenience only and shall not affect the construction or
interpretation of this Agreement. Use of the singular shall include the
plural, and vice versa, where necessary in the construction or interpretation
of this Agreement. Specification of any section or subsection herein shall
be deemed to include specification of any exhibit or appendix referred to
therein. Although the obligations of the Savings Banks under this Agreement
are several, each Savings Bank may individually enforce its rights to receive
the prompt payment of principal and interest in accordance with the terms of
this Agreement and the Note.
Section 8.5. GOVERNING LAW. This Agreement, the Notes, and the
Stock Pledge Agreement shall be construed in accordance with and governed by
the laws of the State of Maine. Borrower consents to the jurisdiction of the
courts of the State of Maine (including the federal district court) over all
matters arising in connection with this Agreement, the Notes, or the Stock
Pledge Agreement and all suits in that regard shall be brought in such courts
unless at least Three Fourths of the Savings Banks otherwise consent in
writing. The parties waive the right to trial by jury.
Section 8.6. PAYMENT OF EXPENSES AND TAXES. Borrower agrees to
pay all out of pocket costs and expenses of the Agent and the Savings Banks
in connection with the negotiation, preparation, execution and delivery of
this Agreement, the Notes, the Stock Pledge Agreement, and any other related
documents, including the reasonable fees and disbursements of
39
special counsel to the Agent and the Savings Banks, subject to the provisions
of Section 4.1(f) of this Agreement, and to pay all actual and reasonable
out of pocket costs and expenses of the Agent and the Savings Banks in
connection with the administration and enforcement of this Agreement, the
Notes, and the Stock Pledge Agreement, including reasonable attorneys' fees
and disbursements arising in connection therewith (whether or not suit is
instituted). Borrower agrees to indemnify the Agent and the Savings Banks
from and against any and all liabilities, losses, damages, penalties,
actions, judgments, costs, expenses (including, without limitation,
reasonable attorneys' fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
the Agent or the Savings Banks in any litigation, proceeding or investigation
instituted or conducted by any Person (other than Borrower) with respect to
any aspect of, or any transaction contemplated by, or referred to in, this
Agreement, or any matter related to the business of Borrower or any
securities or other litigation arising as a result of any action or failure
to act by Borrower. Borrower also agrees to pay, and to save Agent and the
Savings Banks harmless from any delay in paying, all stamp and other taxes,
if any, which may be payable or determined to be payable in connection with
the execution and delivery of this Agreement, the Notes, the Stock Pledge
Agreement, or any modification hereof or thereof, and all filing and
recording fees in connection therewith.
Section 8.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement and in any certificates
or other documents delivered pursuant hereto shall survive the execution and
delivery of this Agreement and the making of the loans hereunder, and the
provisions of Section 8.6 hereof shall survive payment of the Notes.
40
Section 8.8. NOTICES. All notices, requests and demands to or
upon any party hereto shall be deemed to have been given or made when
delivered or three (3) Business Days after the date when mailed, first class
postage prepaid, addressed to such party as follows or to such other address
as may be hereafter designated in writing by such party to the other parties
hereto:
(a) if to the Savings Banks, to the Agent, to:
Machias Savings Bank
4 Center Street
Machias, Maine 04654-1110
Attention: Mr. Edward L. Hennessey, Jr., President
(i) with a copy (which shall not constitute notice) to:
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Attention: John J. Gorman, Esq.
(b) if to Borrower to:
First Coastal Corporation
36 Thomas Drive
Westbrook, Maine 04092
Attention: Mr. Gregory T. Caswell, President
(i) with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Howard I. Flack, Esq.
41
Section 8.9. EXECUTION. This Agreement may be executed by the
parties hereto individually or in any combination of the parties hereto in
several separate counterparts, each of which shall be an original and all of
which taken together shall constitute one and the same Agreement.
Section 8.10. AMENDMENTS. This Agreement and its Exhibits,
together with the provisions of the Notes and the Stock Pledge Agreement and
other documents identified herein, constitute the entire agreement between
the parties hereto, and no amendment or waiver of any provision of this
Agreement, the Stock Pledge Agreement or the Notes nor consent to any
departure by Borrower therefrom shall in any event be effective unless the
same shall be in writing and signed by the Savings Banks and Borrower, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
Section 8.11. NO FIDUCIARY RELATIONSHIP. Borrower acknowledges
that nothing contained in this Agreement, the Stock Pledge Agreement, or the
Notes is intended to or shall result in the existence of any fiduciary
obligation of the Agent or the Savings Banks to Borrower, Borrower being
experienced and sophisticated in financial and credit relationships and being
represented by experienced counsel of its own choosing.
Section 8.12. DEFINITIONS. For purposes of this Agreement, terms
bearing initial capitals and defined in various previous Sections of this
Agreement shall have the meanings stated in such Sections; financial or
accounting terms not specifically defined shall have the meanings ordinarily
applied under generally accepted accounting principles applied on a
consistent basis ("GAAP"); and the following terms shall have the meanings
stated below, except as the context otherwise requires:
42
(a) "Affiliates" means , with respect to a corporation, any other
corporation or corporations (a) of which it owns 50% or more of the stock,
(b) which owns 50% or more of its stock, or (c) 50% or more of the stock of
which is owned by a corporation that owns 50% or more of its stock.
(b) "Brokered Deposits" means deposits in Coastal Savings that
were placed with Coastal Savings by or through any Person engaged in the
business of placing deposits for others or of placing funds in accounts to be
sold to others.
(c) "Business Day" means a day of the year on which banks
generally under the laws of the State of Maine are not required or authorized
to close, and in any event shall not include a Saturday or Sunday.
(d) "Closing Date" or "Closing" means the date on which all of the
conditions precedent stated in Section 4.1 have been satisfied and the date
on which the closing of the Recapitalization occurs;
(e) "Knowledge of Borrower" means the actual knowledge of the
president, the chief executive officer, the chief financial officer and/or
the board of directors of the Borrower.
(f) "Three Fourths of the Savings Banks" means, as of any date,
Savings Banks (including the Agent, if applicable) on such date holding at
least 75% of the total principal amount then outstanding under the Notes,
including, if applicable, any Notes held by the Agent.
(g) "Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or a government or any agency or
political subdivision thereof.
43
ARTICLE IX. THE AGENT
Section 9.1. APPOINTMENT, POWERS AND IMMUNITIES. Each Savings
Bank hereby appoints and authorizes the Agent to act as its agent hereunder,
under the Stock Pledge Agreement, and under the Notes with such powers as are
specifically delegated to the Agent by the terms of this Agreement, the Stock
Pledge Agreement, and the Notes, together with such other powers as are
reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement, the
Stock Pledge Agreement, and the Notes and shall not be a trustee for any
Savings Bank. The Agent shall not be responsible to the Savings Banks or to
Borrower or any Borrower Subsidiary for any recitals, statements,
representations, or warranties made by the Borrower in this Agreement, or the
Notes in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement, or the Notes, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or the Notes or any other document referred to or provided for
herein or therein or for the collectibility of the Notes or of any failure by
the Borrower to perform any of its obligations hereunder or under the Notes.
The Agent may employ agents and attorneys-in-fact and shall not be answerable
to Savings Banks or to Borrower or any Borrower Subsidiary except as to money
or securities received by it or its authorized agents, for the gross
negligence or willful misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Neither the Agent (in its capacity as
Agent) nor any of its directors, officer, employees, or agents shall be
liable or responsible to the Savings Banks or to the Borrower or any Borrower
Subsidiary
44
for any action taken or omitted to be taken by it or them hereunder, under
the Stock Pledge Agreement or under the Notes or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
Section 9.2. RELIANCE BY AGENT. The Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopy, telegram or cable) reasonably believed
by it to be genuine and correct and to have been signed or sent by or on
behalf of the proper person or persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Agent. As to any matters not expressly provided for by this Agreement, the
Stock Pledge Agreement, or the Notes, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder, or under the
Notes in accordance with instructions signed by Three Fourths of the Savings
Banks, and such instructions of Three Fourths of the Savings Banks and any
action taken or failure to act pursuant thereto shall be binding on all of
the Savings Banks.
Section 9.3. EVENTS OF DEFAULT. The Agent shall not be deemed to
have knowledge of the occurrence of an Event of Default (other than the
non-payment of principal of or interest under the Notes) unless the Agent has
received written notice from a Savings Bank or Borrower specifying such Event
of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of an Event of
Default, the Agent shall give notice thereof to all of the Savings Banks.
The Agent shall (subject to Section 9.7. hereof) take such action with
respect to the Pledged Stock upon an Event of Default as shall be directed
by Three Fourths of the Savings Banks, subject to the terms of the Stock
Pledge Agreement.
45
Section 9.4. RIGHTS AS A SECURED PARTY. With respect to the
Stock Pledge Agreement, the Agent in its capacity as a Secured Party
hereunder shall have the same rights and powers hereunder as any other
Secured Party and may exercise the same as though it were not acting as the
Agent, and the terms "Secured Party" or "Secured Parties" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
The Agent and its Affiliates may (without having to account therefore to any
Savings Bank) lend money to and generally engage in any kind of business with
the Borrower, as if it were not acting as the Agent, and the Agent may accept
fees and other consideration from Borrower, for services in connection with
this Agreement, or the Notes or otherwise without having to account for the
same to the Savings Banks.
Section 9.5. INDEMNIFICATION. The Savings Banks shall indemnify
the Agent (to the extent not reimbursed by Borrower under this Agreement),
ratably in accordance with the aggregate principal amount of the Notes
purchased by the Savings Banks (or, if no balances under the Notes are at the
time outstanding, ratably in accordance with their respective purchase
commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this Agreement,
the Stock Pledge Agreement, or the Notes or any other documents contemplated
by or referred to herein or therein or the transactions contemplated by or
referred to herein or therein or the transactions contemplated hereby and
thereby (including, without limitation, the costs and expenses which the
Borrower is obligated to pay under Sections 4.1(f) and 8.6 hereof, but
excluding, unless an Event of Default has occurred and is continuing, normal
administrative
46
costs and expenses incident to the performance of its agency duties
hereunder) or the enforcement of any of the terms hereof or of any such other
documents, provided that no Savings Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified; and provided further, that in
determining the pro rata share of the Savings Banks' for indemnification of
the Agent, the pro rata share of the Agent, if the Agent is a Savings Bank,
shall be included and taken into account.
Section 9.6. NON-RELIANCE ON AGENT AND OTHER SAVINGS BANKS. Each
Savings Bank agrees that it has, independently and without reliance on the
Agent or any other Savings Bank, and based on such documents and information
as it has deemed appropriate, made its own credit analysis of Borrower and
decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Savings Bank, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own analysis and decisions in taking or not taking actions under
this Agreement, the Notes or the Stock Pledge Agreement. The Agent shall not
be required to keep itself informed as to the performance or observance by
Borrower of this Agreement, or the Notes or any other document referred to or
provided for herein or therein or to inspect the properties or books of
Borrower on behalf of any other Savings Banks. Except for notices, reports
and other documents and information expressly required to be furnished to the
Savings Banks by the Agent hereunder or under the Notes, the Agent shall not
have any duty or responsibility to provide any Savings Bank with any credit
or other information concerning the affairs, financial condition or business
of Borrower which may come into the possession of the Agent or any of its
affiliates.
47
Section 9.7. FAILURE TO ACT. Except for action expressly
required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder or thereunder on behalf of
other Savings Banks unless it shall be indemnified to its satisfaction by the
Savings Banks on a PRO RATA basis against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
such action.
Section 9.8. RESIGNATION OR REMOVAL OF AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving not less than 30 days prior written notice
thereof to the Savings Banks and Borrower, and the Agent may be removed at
any time upon the written request of all other Savings Banks. Upon any such
resignation or removal, the other Savings Banks shall have the right to
appoint a successor Agent. The appointment of a successor Agent shall be
subject to the written consent of the Borrower, which consent shall not be
unreasonably withheld, if the proposed successor Agent is not one of the
Savings Banks. Upon the acceptance of any appointment as agent hereunder or
under the Notes by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder and under the Stock Pledge Agreement.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article 9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
Section 9.9. PRO RATA APPLICATION OF PAYMENTS. Section 1.7 of
this Agreement provides for payments hereunder to be made to each Savings
Bank. In the event that any payment to which the Savings Banks are entitled
hereunder is received by the Agent, however, (a)
48
upon its receipt of any payment of principal, interest or fees hereunder in
immediately available funds, the Agent shall, no later than the following
Business Day, remit such payment to the Savings Banks on a PRO RATA basis in
accordance with the principal amount outstanding under each of the Notes, (b)
in the case of receipt of payments of funds other than in immediately
available funds, the Agent shall remit to Savings Banks immediately after
receiving reasonable assurance that such funds are collected funds, and, in
the event that payments remitted are subsequently not collected by the Agent,
the Savings Banks shall return to the Agent any such funds remitted by the
Agent.
49
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed and delivered on its behalf as of the date stated on the
first page hereof.
FIRST COASTAL CORPORATION
By: /s/ Gregory T. Caswell
-------------------------------------
Gregory T. Caswell
President and Chief Executive Officer
ANDROSCOGGIN SAVINGS BANK
By: /s/ Steven A. Closson
--------------------------------------
Steven A. Closson
President and Chief Executive Officer
BANGOR SAVINGS BANK
By: /s/ P. James Dowe, Jr.
---------------------------------------
P. James Dowe, Jr.
President and Chief Executive Officer
MACHIAS SAVINGS BANK
By: /s/ Edward L. Hennessey, Jr.
---------------------------------------
Edward L. Hennessey, Jr.
President and Chief Executive Officer
NORWAY SAVINGS BANK
By: /s/ R. Tardif
----------------------------------------
R. Tardif
Senior Vice President
50
MACHIAS SAVINGS BANK, AS AGENT
By: /s/ Edward L. Hennessey, Jr.
----------------------------------------
Edward L. Hennessey, Jr.
President and Chief Executive Officer
51
EXHIBIT 1
PROMISSORY NOTE
$1,000,000 Dated: , 1996
FOR VALUE RECEIVED, the undersigned, First Coastal Corporation, a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to
("Lender"), subject to the terms and conditions of
the Loan Agreement, of even date herewith, among the Borrower, Machias
Savings Bank, as Agent (the "Agent"), and the Lender and the other savings
banks named therein (the "Loan Agreement"), the principal amount of ONE
MILLION DOLLARS AND NO CENTS ($1,000,000.00), payable on or before the
Maturity Date (as defined below), together with interest on the unpaid
principal amount of this Note from the date hereof, at a rate per annum equal
to 10.85% (computed on the basis of a 365-day year), to and including the
Maturity Date. Interest shall be payable quarterly, in arrears, on the last
day of each calendar quarter commencing on September 30, 1996 and continuing
on each December 31, March 31, June 30 and September 30 thereafter and on the
Maturity Date.
Commencing on June 30, 1998, and continuing semi-annually on each
December 31 and June 30 thereafter until the Maturity Date (as defined
below), Borrower shall pay to Lender a principal payment of $50,000; the
entire remaining principal balance of this Note shall be paid on December 31,
2001 (the "Maturity Date"). The final payment of the remaining principal
balance of this Note shall be accompanied by the payment of all accrued but
unpaid interest with respect to the principal balance outstanding prior
thereto.
Borrower may prepay this Note in whole or in part at any time at its
option upon not less than three Business Days prior written notice,
specifying the date and the amount of prepayment, and upon the payment of all
accrued but unpaid interest on the amount prepaid to the date of such
prepayment, provided that each such optional principal prepayment shall be in
a minimum amount of $25,000, and provided further, that any optional
prepayment during the first three years following the Closing Date shall be
accompanied by a prepayment premium as set forth in Section 1.4 of the Loan
Agreement.
The obligation of the Borrower to the Lender hereunder is secured
pursuant to the terms of a Stock Pledge Agreement, dated as of the date
hereof, made by the Borrower in favor of the Agent (the "Stock Pledge
Agreement"). Upon the occurrence of an Event of Default (as defined in the
Loan Agreement), the Lender shall have all of the rights set forth in the
Loan Agreement and the Stock Pledge Agreement.
Whenever any payment of principal, interest or fees to be made hereunder
becomes due on a day other than a Business Day (as defined in the Loan
Agreement), such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
the amount of interest then to be paid. All payments and prepayments
hereunder shall be made by wire transfer to the Lender's account (as
specified in the Loan Agreement) without offset or counterclaim, in such
money of the United States as at the
time of payment shall be legal tender for the payment of public and private
debts and in immediately available funds. Each payment shall be received by
each Lender no later than 2:00 p.m., Eastern Time (standard or daylight, as
in effect) and any payment received after such time shall be treated as
received on the next Business Day.
Presentment and demand for payment, notice of dishonor, protest and
notice of protest are hereby waived by the Borrower. The Borrower agrees to
pay all out-of-pocket expenses (including, but not limited to, reasonable
attorneys' fees) incurred by the holder hereof in connection with the
enforcement of this Note.
This Note and the rights and obligations of the Lender and the Borrower
hereunder shall be governed by and interpreted and construed in accordance
with the laws of the State of Maine (but not including the choice of law
rules thereof).
Unless an Event of Default shall have occurred, this Note may not be
transferred or assigned by the Lender without the prior written consent of
the Borrower.
FIRST COASTAL CORPORATION
By: _________________________________________
Name: Gregory T. Caswell
Title: President and Chief Executive Officer
2
EXHIBIT 2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is entered into as
of , 1996, by and between FIRST COASTAL CORPORATION, a Delaware
corporation (the "Pledgor"), and MACHIAS SAVINGS BANK for itself and as agent
(the "Agent") for the Lenders (hereinafter defined) who are parties to the
Loan Agreement described below.
BACKGROUND. The Pledgor, Androscoggin Savings Bank, Bangor Savings
Bank, Machias Savings Bank, and Norway Savings Bank (the "Lenders") have
executed and delivered a certain Loan Agreement dated this date (the "Loan
Agreement").
The Pledgor has executed and delivered the Notes (as hereinafter
defined) of even date herewith and in connection therewith is required to
execute and deliver this Pledge Agreement and to pledge hereunder the Pledged
Stock (as hereinafter defined) as security for the Notes.
It is a condition to the Lenders' obligation to purchase the
promissory notes issued by Pledgor as provided for in the Loan Agreement (the
"Notes"), that the Pledgor execute this Pledge Agreement and, pursuant
hereto, pledge the Pledged Stock, as defined in this Pledge Agreement, as
security for the prompt satisfaction of all obligations of the Pledgor
arising under the Loan Agreement and the Notes (the "Obligations").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby mutually agree, intending to be legally bound,
as follows:
1. The term "Pledged Stock" shall mean the 100,000 shares of
Coastal Savings Bank common stock, par value $1.00 per share, described in
Schedule I hereto, together with all proceeds thereof and all cash,
additional securities and other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any or
all of such Pledged Stock, but excluding any cash dividends which Pledgor is
authorized to receive and retain pursuant to Section 2(d) of this Pledge
Agreement.
2. (a) As security for the prompt satisfaction of the
Obligations, the Pledgor hereby pledges to the Agent the Pledged Stock and
grants the Agent a lien thereon and security interest therein. All
certificates and other instruments or documents evidencing rights or
ownership in the Pledged Stock are being delivered to the Agent at the time
of execution and delivery of this Pledge Agreement, accompanied by stock
powers executed in blank, and by such other documents or instruments as the
Agent may reasonably request, in accordance with Section 4.1(a)(ix) of the
Loan Agreement. The Agent shall take and maintain possession in its capacity
as Agent for itself as Lender and for the other Lenders.
(b) Until the termination of this Pledge Agreement, if the
Pledgor shall become entitled to receive or shall receive, in connection with
any of the Pledged Stock, any:
(i) Stock certificates, including, but without
limitation, any certificates representing a stock dividend or issued in
connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of shares, stock split,
spin-off, or split-off;
2
(ii) Options, warrants, or rights, whether as an
addition to, or in substitution or in exchange for, any of the Pledged Stock,
or otherwise;
(iii) Dividends or distributions payable in property,
including securities issued by other than the issuer on any of the Pledged
Stock; or
(iv) Dividends or distributions of any sort, other than
cash dividends which the Pledgor is entitled to receive and retain pursuant
to Section 2(d) of this Pledge Agreement;
then the Pledgor shall accept the same as the Agent's agent, in trust for the
Agent, and shall deliver them forthwith to the Agent in the exact form
received with, as applicable, the Pledgor's endorsement when necessary, or
appropriate stock powers duly executed in blank, to be held by the Agent,
subject to the terms hereof, as part of the Pledged Stock.
(c) If an Event of Default (as defined in the Loan Agreement)
shall have occurred and be continuing, the Agent, at its option, may have any
part or all of the Pledged Stock registered in its name or that of its
nominee, and the Pledgor hereby covenants that, upon the Agent's request, the
Pledgor will cause the issuer, transfer agent or registrar of the Pledged
Stock to effect such registration.
(d) For so long as no Event of Default exists under the Loan
Agreement, Pledgor shall have the right to receive cash dividends declared
and paid by Coastal Savings Bank with respect to the Pledged Stock. Any and
all stock or liquidating dividends, other distributions in property, returns
of capital or other distributions made on or in respect of the Pledged Stock,
whether resulting from a subdivision, combination or reclassification of the
outstanding capital stock of Coastal Savings Bank, received in exchange for
the Pledged
3
Stock or any part thereof or received as a result of any merger,
consolidation, acquisition or other exchange of assets to which Coastal
Savings Bank is a party or otherwise, shall be and become part of the Pledged
Stock pledged hereunder and, if received by Pledgor, shall forthwith be
delivered to the Agent, to be held subject to the terms of this Pledge
Agreement.
(e) For so long as no Event of Default exists under the Loan
Agreement, Pledgor shall have the right to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Pledged Stock or
any part thereof. Effective upon the occurrence of any Event of Default,
Pledgor hereby revokes any and all previous proxies relating to the Pledged
Stock and appoints the Agent or its nominee as its proxyholder to attend and
vote at any and all meetings of the stockholders of Coastal Savings Bank
(including any adjournments thereof) and to act on requests for written
consent of stockholders as if a duly appointed representative of Pledgor had
attended such meeting or otherwise voted on behalf of Pledgor or given
Pledgor's written consent. This appointment of the Agent as Pledgor's proxy
is coupled with an interest and shall be irrevocable until the payment in
full of the Obligations under this Pledge Agreement.
(f) The Agent shall execute and deliver (or cause to be
executed and delivered) to Pledgor all proxies, powers of attorney, dividend
orders and other instruments as Pledgor may request for the purpose of
enabling Pledgor to receive any cash dividends which Pledgor is authorized to
receive and retain pursuant to Section 2(d) hereof and to exercise the voting
and/or consensual rights and powers which Pledgor is entitled to exercise
pursuant to Section 2(e) hereof; and Pledgor shall execute and deliver to the
Agent such instruments as may be required or may be requested by the Agent to
enable the Agent to
4
receive and retain the distributions or other property it is authorized to
receive and retain on behalf of the Agent pursuant to Section 2(d) hereof.
Consistent with applicable law, Borrower shall bear all risks of diminution
or depreciation of the Pledged Stock, and the Agent shall have the right, in
its sole discretion, to refrain from selling or otherwise disposing of the
Pledged Stock.
(g) Upon the occurrence and during the continuance of an
Event of Default, the Agent may, without demand of performance or other
demand, advertisement, or notice of any kind (except the notice specified
below of the time and place of public or private sale) to or upon the Pledgor
or any other person (all of which are, to the extent permitted by law, hereby
expressly waived), forthwith realize upon the Pledged Stock or any part
thereof, and may forthwith sell or otherwise dispose of and deliver the
Pledged Stock or any part thereof or interest therein, or agree to do so, in
one or more units at public or private sale or sales, at any stock exchange,
broker's board or at any of the Agent's offices or elsewhere, at such prices
and on such terms (including, but without limitation, a requirement that any
purchaser of all or any part of the Pledged Stock purchase the shares
constituting the Pledged Stock for investment and without any intention to
make distribution thereof) as the Agent may deem commercially reasonable, for
cash or on credit, or for future delivery without assumption of any credit
risk, with the right to the Agent or any purchaser to purchase upon any such
sale the whole or any part of the Pledged Stock free of any right or equity
of redemption in the Pledgor, which right or equity is hereby expressly
waived and released.
(h) The proceeds of any such disposition or other action by
the Agent shall be applied as follows:
5
(i) First, to the costs and expenses incurred in
connection therewith or incidental thereto or to the care or safekeeping of
any of the Pledged Stock or in any way relating to the rights of the Agent
hereunder, including reasonable attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the Obligations;
(iii) Third, to the payment of any other amounts
required by applicable law (including, without limitation, Section
9-504(1)(c) of the Uniform Commercial Code); and
(iv) Fourth, to the Pledgor to the extent of any
surplus proceeds. Provided that if the proceeds are insufficient to pay all
such expenses, Obligations and other amounts, the Pledgor shall remain liable
for any deficiency.
(i) Except as may otherwise be expressly required by
applicable law, the Agent need not give more than seven (7) days' notice of
the time and place of any public sale or of the time after which a private
sale may take place, which notice the Pledgor hereby deems reasonable.
3. The Pledgor represents and warrants that:
(a) It has all requisite corporate power and corporate
authority to enter into this Pledge Agreement, to pledge the Pledged Stock
for the purposes described in Section 2(a), and to carry out the transactions
contemplated by this Pledge Agreement;
(b) It is the legal and beneficial owner of all of the
Pledged Stock;
(c) The shares of the Pledged Stock constitute all of the
issued and outstanding shares of capital stock of the issuer thereof;
6
(d) All of the shares of the Pledged Stock have been duly and
validly issued, are fully paid and nonassessable, subject to the provisions
of 9-B, Maine Revised Statutes Section 315, as amended, and are owned by the
Pledgor free of any pledge, mortgage, hypothecation, lien, charge,
encumbrance, or security interest in such shares or the proceeds thereof
except such as are granted hereunder.
(e) The execution, delivery and performance of this Pledge
Agreement will not result in any violation of any provision of the Pledgor's
charter or by-laws, or violate or constitute a default under the terms of any
agreement, indenture or other instrument, license, judgment, decree, order,
law, statute, ordinance, or other governmental rule or regulation applicable
to the Pledgor or any of its property; and
(f) Upon delivery of all stock certificates representing the
Pledged Stock to the Agent or its agent, duly endorsed in blank or
accompanied by one or more stock powers duly endorsed in blank, such delivery
and this Pledge Agreement shall create a valid first lien upon, and perfected
security interest in, the Pledged Stock, subject to no prior security
interest, lien, charge, encumbrance, or agreement purporting to grant to any
third party a security interest in the Pledged Stock.
4. (a) The Pledgor hereby covenants that, until all of the
Obligations have been satisfied in full, it will not:
(i) Sell, convey, or otherwise dispose of any of the
Pledged Stock or any interest therein or create, incur, or permit to exist
any pledge, mortgage, lien, charge, encumbrance, or any security interest
whatsoever in, or with respect to, any of the Pledged Stock, other than that
created hereby; or
7
(ii) Consent to, or approve of, the issuance of any
additional shares of any class of capital stock by the issuer of the Pledged
Stock, or any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or nonoccurrence of any event or condition
into, or exchangeable for, any such shares, or any warrants, options, rights,
or other commitments entitling any person to purchase or otherwise acquire
any such shares.
(b) The Pledgor warrants and will, at its own expense, defend
the Agent's security interest in and to the Pledged Stock against the claims
of any person, firm, corporation, or other entity, other than those arising
by, through or under Agent or any other Lender.
5. (a) If the Agent shall elect to exercise its right to sell or
otherwise dispose of all or any part of the Pledged Stock, and if, in the
opinion of counsel for the Agent, it is necessary to have the Pledged Stock
or that portion thereof to be sold registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Pledgor will
use its best efforts to cause
(i) the issuer of the Pledged Stock, its directors,
and officers, to take all action necessary to register
the Pledged Stock or that portion thereof to be disposed
of under the provisions of the Securities Act, at the
Pledgor's expense; PROVIDED THAT only one registration
per any six month period shall be required;
(ii) the registration statement relating thereto to
become effective and to remain so for not less than one
year from the date of the first public
8
offering of the Pledged Stock or that portion thereof so
to be disposed of, and to make all amendments thereto and
to the related prospectus which, in the opinion of the
Agent or its counsel, are necessary or advisable, all in
conformity with the requirements of the Securities Act
and the rules and Regulations of the Securities and
Exchange Commission applicable thereto;
(iii) the issuer of the Pledged Stock to comply with the
provisions of the "Blue Sky" laws of any jurisdiction
which the Agent shall reasonably designate; and
(iv) the issuer of the Pledged Stock to make available
to its security holders, as soon as practicable ( but in
no event later than sixteen (16) months after the
effective date of such registration statement), an
earnings statement (which need not be audited) covering a
period of at least twelve (12) months beginning with the
first month after the effective date of any such
registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities
Act.
(v) if registration under the Securities Act is not
required, but, in the opinion of counsel to the Agent,
information substantially similar to that which would be
provided in connection with a registration under the
Securities Act is appropriate or required in connection
with a sale or disposition of the Collateral, the Pledgor
shall provide such information
9
and shall cooperate with the Secured parties in providing
such information as requested by Agent, at the expense of
the Pledgor, and shall otherwise comply with the
provisions of this Section 5(a) as if registration under
the Securities Act was required.
(b) The Pledgor acknowledges that a breach of any of the
covenants contained in paragraph 5(a) above may cause irreparable injury to
the Agent; that the Agent will have no adequate remedy at law with respect to
such breach; and, as a consequence, that the Pledgor's covenants in paragraph
5(a) shall be specifically enforceable against the Pledgor; and the Pledgor
hereby waives, to the extent such waiver is enforceable under law, and shall
not assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred.
(c) Notwithstanding the foregoing, the Pledgor recognizes
that the Agent may be unable to effect a public sale of all or a part of the
Pledged Stock and may be compelled or deem it best to resort to one or more
private sales to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire the Pledged Stock for their own
account, for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to the Agent than those of public sales,
and agrees that such private sales shall, not by reason thereof, be deemed to
have been made in a commercially reasonable manner, and that the Agent has no
obligation to delay sale of any Pledged Stock to permit the issuer thereof to
register it for public sale under the Securities Act.
10
(d) Pledgor shall use its best efforts to cause any issuer,
transfer agent, or registrar of the Pledged Stock to take all such actions
and execute all such documents as may be necessary or appropriate, upon the
request of Agent, to (i) remove any restrictive legends placed on the Pledged
Stock that are not legally required for such Pledged Stock held by Agent;
(ii) after an Event of Default, effect any sale or sales of Pledged Stock in
accordance with Rule 144 under the Securities Act, if applicable; and (iii)
after an Event of Default, effect any sale or other disposition of the
Pledged Stock in any lawful public or private sale or other disposition.
6. The Pledgor will promptly deliver to the Agent all written
notices and will promptly give the Agent written notice of any other notices
received by it with respect to Pledged Stock, and the Agent will promptly
give like notice to the Pledgor of any such notices received by it or its
nominee.
7. The Pledgor shall at any time, and from time to time, upon the
written request of the Agent and at the expense of the Pledgor, execute and
deliver such further documents and do such further acts and things as the
Agent may reasonably request to effect the purposes of this Pledge Agreement,
including, without limitation, delivering to the Agent upon the occurrence of
an Event of Default irrevocable proxies with respect to the Pledged Stock in
form satisfactory to the Agent.
8. Upon the satisfaction in full of all Obligations and the
satisfaction of all additional costs and expenses of the Agent as provided
herein, this Pledge Agreement shall terminate, and the Agent shall deliver to
the Pledgor without recourse or representation, at the
11
Pledgor's expense, such of the Pledged Stock as shall not have been sold or
otherwise disposed of pursuant to this Pledge Agreement.
9. (a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Stock while held hereunder (which duty shall not
include any steps to preserve rights against prior parties or to send
notices, perform services, or take any action in connection with the
management of the Pledged Stock), the Agent shall have no duty or liability
to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it or tendering
surrender of it to the Pledgor.
(b) No course of dealing between the Pledgor and the Agent,
nor any failure to exercise, nor any delay in exercising, any right, power or
privilege of the Agent hereunder or under the Pledge Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies provided herein and in the Loan
Agreement and in all other agreements, instruments, and documents delivered
pursuant to or in connection with the Loan Agreement are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law,
including, but without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code.
(d) The provisions of this Pledge Agreement are severable,
and if any clause or provision shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision or part thereof
in such jurisdiction and shall not in any manner affect such clause or
provision
12
in any other jurisdiction or any other clause or provision in this Pledge
Agreement in any jurisdiction.
10. Any notice required or permitted by this Pledge Agreement
shall be effective if given in accordance with the provisions of the Loan
Agreement.
11. This Pledge Agreement shall inure to the benefit of, and shall
be binding upon, the successors and assigns of the parties hereto.
12. Section headings used herein are for convenience only and
shall not affect the construction or interpretation of this Pledge Agreement.
Use of the singular shall include the plural, and vice versa, where
necessary in the construction or interpretation of this Pledge Agreement.
Specification of any section or subsection herein shall be deemed to include
specification of any schedule referred to therein.
13. This Pledge Agreement may be executed by the parties hereto
individually or in any combination of the parties hereto in several separate
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same Pledge Agreement.
14. This Pledge Agreement shall bind and inure to the benefit of
the parties, their legal representatives, successors and assigns, provided,
however, that the Agent may not transfer or assign any interest herein (other
than in connection with a successor Agent) without the prior written consent
of the Pledgor.
15. This Pledge Agreement shall be construed in accordance with
the substantive laws of the State of Maine, without regard to principles of
conflicts of law.
13
16. No amendment or waiver of any provision of this Stock Pledge
Agreement nor consent to any departure by Pledgor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
14
IN WITNESS WHEREOF, each of the parties hereto has caused this
Pledge Agreement to be executed on its behalf as of the date and year first
above written.
Attest: [CORPORATE SEAL] FIRST COASTAL CORPORATION
By: ______________________________ By: ___________________________________
Secretary President
Attest: [CORPORATE SEAL] MACHIAS SAVINGS BANK,
as Agent
By: ______________________________ By: ______________________________
Secretary President
15
SCHEDULE I
16
EXHIBIT 3
July __, 1996
The Lenders Party to the Loan Agreement
referred to below and Machias Savings
Bank, as Agent thereunder
RE: LOAN AGREEMENT DATED AS OF JULY __, 1996
Ladies and Gentlemen:
This firm has acted as special counsel to First Coastal
Corporation, a Delaware corporation (the "Company"), in connection with the
Loan Agreement dated as of July __, 1996 (the "Loan Agreement"), among the
Company, the lenders party thereto (the "Lenders") and Machias Savings Bank,
as Agent (in such capacity, the "Agent"). This opinion letter is furnished
to you pursuant to the requirements set forth in Section 4.1(a)(x) of the
Loan Agreement in connection with the closing thereunder on the date hereof.
Capitalized terms used herein which are defined in the Loan Agreement shall
have the meanings set forth in the Loan Agreement, unless otherwise defined
herein.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. Executed copy of the Loan Agreement.
2. Executed copies of the Notes.
3. Executed copy of the Stock Pledge Agreement.
4. Coastal Savings Bank stock certificate number R-2 for 100,000
shares of common stock (the "Shares") issued to the Company
dated July __, 1996, together with a related stock power
executed by the Company.
5. The Restated Certificate of Incorporation of the Company , as
amended (the "Company Charter"), as certified by the Secretary
of State of the State of Delaware on July __, 1996 and as
certified
Machias Savings Bank, Agent, ET. AL.
July __,1996
Page 2
by the Secretary of the Company on the date hereof as being
complete, accurate and in effect.
6. The Amended and Restated Bylaws of the Company (the "Company
Bylaws"), as certified by the Secretary of the Company on the
date hereof as being complete, accurate and in effect.
7. A certificate of good standing of the Company issued by the
Secretary of State of the State of Delaware dated July __,
1996; and a Fax Good Standing Telegram from Corporation Trust
System dated the date hereof that memorializes the electronic
confirmation by the Secretary of State of the State of
Delaware of the good standing of the Company as of the date
hereof.
8. Certain resolutions of the Board of Directors of the Company
adopted at meetings held on April 30, 1996 and June 11, 1996,
as certified by the Secretary of the Company on the date
hereof as being complete, accurate and in effect, relating to,
among other things, authorization of the Loan Agreement, the
Notes and the Stock Pledge Agreement, and arrangements in
connection therewith.
9. A certificate of the Secretary of the Company, dated July __,
1996, as to the incumbency and signatures of certain officers
of the Company.
10. A certificate of certain officers of the Company, dated
July __, 1996, as to certain facts relating to the Company.
11. Hogan & Hartson L.L.P. litigation docket.
The Loan Agreement, the Notes and the Stock Pledge Agreement are
sometimes hereinafter referred to collectively as the "Loan Documents."
We have not, except as specifically identified above, made any
independent review or investigation of factual matters, including the
organization, existence, good standing, assets, business or affairs of the
Company, or any other party. In our examination of the Loan Documents and
the aforesaid certificates,
Machias Savings Bank, Agent, ET. AL.
July __,1996
Page 3
documents and agreements, we have assumed the genuineness of all signatures
(other than those on behalf of the Company on the Loan Documents), the legal
capacity of all natural persons, the accuracy and completeness of all
documents submitted to us, the authenticity of all original documents and the
conformity to authentic original documents of all documents submitted to us
as copies (including telecopies). We also have assumed the accuracy,
completeness and authenticity of the foregoing certifications (of public
officials, governmental agencies and departments, corporate officers and
individuals) and statements of fact, on which we are relying, and have made
no independent investigations thereof. In rendering the following opinions
we have relied as to factual matters, without independent investigation, upon
the representations, warranties and certifications made by the Company in or
pursuant to the Loan Documents and upon the officers' certificate identified
in Paragraph 10 above. However, no facts have come to our attention in
connection with our representation of the Company which cause us to believe
that any of the foregoing assumptions, representations, warranties or
certifications is incorrect. This opinion letter is given, and all
statements herein are made, in the context of the foregoing.
As used in this opinion letter, the phrase "to our knowledge" means
the actual knowledge (that is, the conscious awareness of facts or other
information) of lawyers in the firm who have given substantive legal
attention to representation of the Company in connection with the Loan
Documents.
For purposes of the opinions expressed in paragraph (d) below, we
have assumed that (i) Coastal Savings Bank has received the consideration for
the Shares provided in the resolutions of its board of directors authorizing
the issuance thereof and the Shares are validly issued, fully paid and
non-assessable, (ii) the Company is the sole beneficial owner of all of the
Shares, and (iii) the Agent is taking and will maintain possession of the
certificates representing the Shares in the State of Maine.
For purposes of this opinion letter, we have assumed that (i) the
Agent and each Lender has all requisite power and authority under all
applicable laws, regulations and governing documents to execute, deliver and
perform its obligations under the Loan Documents, (ii) the Agent and each
such Lender has duly authorized, executed and delivered the Loan Documents to
which it is a party, (iii) the Agent and each such Lender is validly existing
and in good standing in all necessary jurisdictions, (iv) the Loan Documents
to which the Agent and each such
Machias Savings Bank, Agent, ET. AL.
July __,1996
Page 4
Lender is a party constitute valid and binding obligations, enforceable
against each of them in accordance with their respective terms, and (v) there
has been no material mutual mistake of fact or misunderstanding or fraud,
duress or undue influence in connection with the negotiation, execution or
delivery of the Loan Documents.
This opinion letter is based as to matters of law solely on
applicable provisions of (i) the General Corporation Law of the State of
Delaware, as amended (the "Delaware Corporation Law"), (ii) Articles 1, 8 and
9 of the Uniform Commercial Code in effect on the date hereof in the State of
Maine (the "UCC"), and (iii) the laws of the District of Columbia, and we
express no opinion as to any other laws, statutes, ordinances, rules or
regulations (such as federal or state securities laws or regulations,
antitrust or unfair competition laws or regulations or tax laws or
regulations). We note that the Loan Documents purport to be governed by the
laws of the State of Maine.
Based upon, subject to and limited by the foregoing, we are of the
opinion that:
(a) The Company was incorporated, and is validly existing and in
good standing, under the laws of the State of Delaware.
(b) The Company has the corporate power and corporate authority
under the Company Charter and the Delaware Corporation Law to execute and
deliver the Loan Documents and to perform its obligations thereunder. The
execution, delivery and performance as of the date hereof by the Company of
the Loan Documents have been duly authorized by all necessary corporate
action of the Company and do not (i) violate the Delaware Corporation Law,
the Company Charter or the Company Bylaws, (ii) to our knowledge, violate any
applicable law, rule, regulation, order, judgment or decree of any Delaware
state governmental agency, (iii) to our knowledge, breach or constitute a
default under any agreement or contract to which the Company is a party or
(iv) to our knowledge, result in the creation of any lien upon any of the
properties of the Company pursuant to any agreement or contract referred to
in the immediately preceding clause (iii).
(c) The Company has duly executed and delivered the Loan
Documents, and each of the Loan Documents constitutes a valid and binding
obligation of the Company, enforceable against it in accordance with its
terms,
Machias Savings Bank, Agent, ET. AL.
July __,1996
Page 5
except (i) as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights (including, without
limitation, the effect of statutory and other law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers), (ii) as may be
limited by the exercise of judicial discretion and the application of
principles of equity including, without limitation, requirements of good
faith, fair dealing, conscionability and materiality (regardless of whether
such agreements are considered in a proceeding in equity or at law) and (iii)
that certain rights, remedies, waivers and other provisions of the Loan
Documents may not be enforceable in accordance with their terms, but, subject
to the exceptions, qualifications and limitations set forth above and
elsewhere in this opinion letter, such unenforceability would not render the
Loan Documents invalid as a whole or (A) preclude the enforcement of the
obligations of the Company to pay the principal of the Notes and interest
thereon at the rate or rates (but not including any increase in rate after
default) set forth therein, (B) impair the Lenders' right to accelerate and
demand payment of the Notes upon the occurrence of an Event of Default or (C)
assuming that the Lenders will comply with all requirements of applicable
procedural and substantive law, preclude the foreclosure of the liens and
security interests created under the Stock Pledge Agreement in accordance
with Part 5 of Article 9 of the UCC.
(d) Taking and retention of possession of the certificate
evidencing the Shares by the Agent pursuant to the Stock Pledge Agreement are
sufficient to transfer to the Agent a security interest pursuant to the Stock
Pledge Agreement in the Company's right, title and interest in and to the
Shares, and the Agent has, by virtue of such transfer pursuant to the Stock
Pledge Agreement (and by virtue of the giving of value to the Company under
the Loan Agreement), a perfected UCC security interest in the Company's
right, title and interest in and to the Shares.
(e) The use by the Company of the proceeds of the Loan as
contemplated in the Loan Agreement and the officers' certificate identified
in Paragraph 10 above does not violate Regulations G or U of the Board of
Governors of the Federal Reserve System.
Based solely upon the officers' certificate identified in Paragraph
10 above and a review of this firm's litigation docket, we hereby confirm to
you that, to our knowledge, there are no actions, suits or proceedings
pending or threatened against the Company, or in which the Company is a
party, before any court or governmental department, commission, board,
bureau, agency or instrumentality
Machias Savings Bank, Agent, ET. AL.
July __,1996
Page 6
that question the validity of the Loan Documents or any action taken or to be
taken pursuant thereto, or that seek to enjoin or otherwise prevent the
consummation of the transactions contemplated by the Loan Documents or that,
if determined adversely to the Company, would reasonably be expected to
materially adversely affect the financial condition, business or results of
operations of the Company and its subsidiaries, taken as a whole.
We assume no obligation to advise you of any changes in the
foregoing subsequent to the delivery of this opinion letter. This opinion
letter has been prepared solely for your use in connection with the closing
under the Loan Agreement on the date hereof, and should not be quoted in
whole or in part or otherwise be referred to, nor be filed with or furnished
to any governmental agency or other person or entity, without the prior
written consent of this firm.
Very truly yours,
HOGAN & HARTSON L.L.P.